Demographics and Pricing

Do you believe the composition of professionals in your firm, and what you can charge for them, are related? That is to say, that clients more highly value and are willing to pay more for the more highly skilled, experienced partners with quicker and sounder judgment—higher prices than they would pay for anyone else in the firm?

And do you believe that client resentment at paying for all but the most assiduously monitored and metered junior associate time is here to stay?

If you believe those things, which shouldn’t require heroic assumptions, then you have to believe that:

• Delivering maximum value to clients, as they perceive it, requires you to change the mix of professionals you deliver;
• Changing the  mix of professionals you “deliver” to clients means reconfiguring your firm’s own internal mix of professionals, or demographics, as it were;
• And the firm of the future will consist of a much higher ratio of highly valued partners to lower valued associates.

This is not a radical concept, certainly not if you step outside Law Land.  (Nor is it by the furthest stretch of the imagination to be taken as critical of associates; they are left virtually defenseless in this economic shift, and if you think I’m callous or indifferent to their fate you haven’t heard about my other company.)

Companies reconfigure their product and service offerings all the time, to more closely hew to client demand. It will take us a bit longer, since our “service offerings” consist of professionally trained and highly skilled human beings, but there can be no serious question what the market is calling for.  And no one at the level we’re talking about wants to work in an organization where their contribution has clearly been marginalized.

So what does this putative firm of the future look like?

For as long as I’ve been in and around this industry, I have heard ad nauseum infinitum that firm ABC or XYZ, whether or not they had any remotely plausible aspiration to these leagues, only wants to act on the “highest value,” “price-insensitive,” “bet the company,” “make or break,” “premium work.”

Your day has arrived. You may wish it hadn’t.

Because what is the model I’ve sketched above? It’s a model, as a partner at an AmLaw 10 told me last week, with “clients who are happy to pay $1,100/hour for me but not $400/hour for even a qualified midlevel associate.”  What is that model?

Wachtell.

We’re all Wachtell now, if we can pull it off.

But I put this squarely in the category of “be careful what you wish for,” since “being Wachtell” is far more challenging than being a typical AmLaw 50-ish firm—no offense to those of you in that category.

Let’s back up: I have a confession. I used “We’re all Wachtell now” calculatedly. The phrase—the very mention of the firm’s name—can inspire envy in the ranks of those who subscribe to the notion that their firm needs to be in that top right quadrant of the 2 x 2 matrix, the “highest value,” “premium work,” etc., engagements. And of course, who can object to Wachtell staking out its own party-of-one place in the PEP stratosphere?

But that’s not all the Wachtell model is about. There are two other critical elements more challenging to embrace: (1) that 1:1 partner:associate leverage, and (2) their intense focus on highly specialized and narrow lines of business, without deviation.

Achieving (1) is going to require wrenching changes in almost every firm that chooses to go down that path, and it can risk introducing centrifigual forces that can tear the place apart before you can achieve the goal.

And as for (2), it requires saying No relentlessly, and many more times than you’ll ever get to say Yes.

Are you game?

And if not, what’s your plan?

We’ll have some final thoughts on that.